Apple is developing a new tablet with a 7.85-inch screen that is likely to sell for significantly less than the latest $499 iPad, with its 9.7-inch display, according to several people with knowledge of the project who declined to be named discussing confidential plans. The product is expected to be announced this year.
Apple’s plan for a tablet with a smaller screen is part of a textbook business strategy: to lure customers who want different sizes of tablets into the iPad product family, say analysts and technology industry executives.
The strategy would most likely include devices with different prices and functions tailored to various uses, they say. The idea is to help Apple solidify its dominance in the tablet market even as the richest companies in the tech business are trying to figure out how to outflank Apple.

This follows similar reports from the Wall Street Journal and Bloomberg. These are all reputable news sites. TheTechStorm has already given its opinion on the matter.